Commerce Commission

PHOTO: People can make submissions on the focus areas for the Commerce Commission study of banking. Photo: RNZ / 123rf

The Commerce Commission is conducting a comprehensive review of competition within the realm of personal banking, with a particular emphasis on bank deposit accounts and home loans.

According to Chairperson John Small, an initial analysis of research findings has revealed that New Zealand’s banks have exhibited higher profitability compared to their counterparts in similar global economies over the last ten years. This observation has prompted inquiries into the potential implications of this trend.

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Small, speaking in the commission’s preliminary issues paper, expressed the need to delve into whether the apparent lack of competition in the realm of personal banking has played a role in this phenomenon.

The commission’s study outlines its focal points for examining personal banking services. Both deposit accounts and home loans are pivotal aspects through which banks compete for retail customers and are widely utilized by a substantial portion of New Zealanders.

Small emphasized that the investigation won’t be limited solely to these products. Instead, it will encompass a broader array of banking services, aiming to provide a comprehensive overview of the competitive landscape among personal banking service providers.

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The study will also encompass an exploration of bundled personal banking services, including insurance offerings, and how these may impact the ease of switching between banks.

Small elaborated on the study’s intentions, stating that it aims to scrutinize the effectiveness of the competitive process. If competition is indeed thriving within the sector, the positive outcomes should manifest in terms of product variety, quality, associated fees, interest rates, charges, and the overall range of services extended to consumers.

Another crucial area of investigation pertains to the role of innovation, or potential lack thereof, in fostering competition within the personal banking industry.

The commission has extended an invitation for submissions to help shape the specific focus areas for this 14-month-long study.

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Small highlighted the significant interest already garnered by this market study. He emphasized that the conclusions drawn will be guided by the feedback and evidence received over the forthcoming weeks. The commission aims to gather input from various sectors, including major and minor banks, as well as non-bank entities. Furthermore, the distinct experiences of different communities and demographics with regard to personal banking services are deemed essential for the commission’s comprehensive understanding of the landscape.

In essence, the Commerce Commission’s exploration aims to shed light on the dynamics of competition within personal banking, spanning various product offerings, customer experiences, and the role of innovation in driving competitiveness.

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